Tuesday, 11 August 2009

Can we provide a Progressive Consensus?

Slí Eile: What type of society do we have (A)? What type of society do we want? (B) How do we move from A to B? Is such a move possible and, if it is, over what realistic time scale? I suggest that in a history of the Irish (and world) economy around the new Millennium some extraordinary findings will emerge:How little was achieved – humanly – compared to the extraordinary growth rates in (measurable economic) output at the end of the last millennium; How, for many people, ‘economic growth’ did not matter and only gave rise to an over-hang of debt, insecurity and animosity; How much lipservice was paid to environmental sustainability and how little was really done to change patterns of consumption and investment to avert catastrophe.

Not that living standards have not improved dramatically over the last quarter century and with them standards of health, education, self-confidence.

But, we are still a long way from an economy and polity that places human need as the primary goal and all else as instrumental in serving such need.

The alarming narrowing of vision and discourse in recent months as a selection of headline economic indicators instill fright, panic, caution and eventually capitulation. At the height of the 1940 Blitz in London in the underground tube stations where people were talkng refuge some people took to chalking up the daily scores in terms of enemy craft downed. It was a morale-boosting move.

After a period of despondency, terror and ‘did you hear the latest,,, unemployment figures, factory closure, tax returns, Moody’s downgrade ….’, it might be advisable to stop talking about it in company and keep up the spirits and keep going. Somehow V signs are not emerging – yet – on the balcony windows of Kildare Street

This is no ordinary economic war. One of the extraordinary features of political economy 2009 is the emergence of:

A confident, strident and ebullient Dublin Consensus
A partial but very pressing focus, more than ever, on issues to do with income distribution.

I say partial because the focus here is on a new class enemy – the over-paid and under-worked public sector worker, the cosseted social welfare recipient who has enjoyed more than workhouse levels of income (has society ever moved beyond subconscious assumptions about poverty, entitlement and incentives?) and the broad mass of workers (public and private) who are deemed to be over-paid and uncompetitive.

(A sinister and deeply worrying under-current is of course the view taken on the streets about newcomers in the labour force – a topic not encountered in fora like irisheconomy and progressive economy). To deflect attention, 'bankers' get the blame often (but who let them away with it?), or 'the Government' (and who elected them and why?)

This is no normal recession. I agree with Paul Sweeney that getting out of this one will be slow (and clearly very painful). It is now timely and urgent to provide an alternative strategy to the one that has clearly emerged under the Dublin Consensus. What shall we call it? A progressive consensus?

Would it consist of broad principles or detailed policy prescriptions? What budgetary, financial and economic scenarios are needed? Does public spending need to be cut? Taxes raised? Borrowing increased? Which institutional reforms are needed? What mix of policies now – this year – and next to address the crisis and move towards the society we dream of?


Joseph said...

I'm going back to developmentalism and nationalisation. Perhaps then we will get a CIA funded coup (as they did in partnership with the Chicago mob so many times before the IMF did the job for them) and Brian and co. will have to flee the country.

Michael Taft said...

Not that Joseph's suggestion doesn't have a certain kind Grahame Greene charm. But here are some starting points for a Progressive Consensus that could be considered:

1) That the public realm must be the prime mover in restoring and sustaining economic growth. With the recession expected to last until late next year, with the distinct probability of a subsequent medium-term period of low-impact growth, the main source of growth and job creation is inevitably the public realm. This need not be a statist thing: public sector, public enterprise, public-private partnerships, growing indigenous companies through public equity (and, if we get local government reform right - local enterprises encompassing a number of different type of municipal and co-operatie forms); all these can be employed as appropriate.

Given that major job creation spurts in the past were prompted by FDI (in the mid-90s) and property/consumer/debt-fueled cosumption in this decade; and given that these conditions are unlikley to play the role they did - we have only one fall-back: the public realm in conjunction with indigenous enterprise.

2. If (1) is accepted, this expansion will have to be financed. This can come through a variety of methods - the balance of which is open to debate. Such methods could include borrowing (Exchequer, ICTU's Economic Recovery Bonds, off-sheet through public enteprises, the Pension Reserve Fund), tax increases and public expenditure cuts (notably tax exependitures), reinvestment of savings from public sector efficiencies and productivity increases, etc. Progressives should begin debating concretely and in detail where the best balance of financing lies.

If (1) is rejected then it has to be established how job creation and economic growth can be sustained without major public supports (that is, where will the investment and jobs come from?); and how the fiscal deficit can be overcome since the current strategy - cutting public expenditure and increasing taxes on low/average income groups - is weakening the economy's ability to deal with future debt, with little demonstrable impact on the annual deficit itself.

Tipster said...

Nah, Michael Taft's comment can't be true. It's too simple. I mean, there's nothing in it that a backbench government TD couldn't wiggle out of defending by saying (a la NAMA) "it's very complicated, you know".